The Blackstone-Blackfish Connection

Buyout firms have basked in the glory of one big deal payday after another this year. But one company representing a signature deal for Blackstone Group LP is lately receiving some unwanted glare.

SeaWorld Entertainment Inc., which Blackstone bought from Anheuser-Busch InBev NV in 2009 and took public in April, has come under fire from animal rights advocates and others in the wake of “Blackfish,” a feature-length documentary that casts the theme-park operator’s signature orca shows in an unfavorable light.

In recent weeks, some celebrities have cancelled planned performances at SeaWorld’s parks, citing the film. On Friday, SeaWorld responded with full-page advertisements around the country in large-circulation newspapers, including The Wall Street Journal. Without mentioning Blackfish, the ad defends SeaWorld’s practices involving the killer whales and other marine animals kept in its parks.

Blackstone, which is not mentioned in the film, bought SeaWorld from Anheuser-Busch for $2.3 billion in 2009, paying about $1 billion with cash and having the company borrow to cover the rest. The New York firm fetched about $560 million selling stock in the IPO. Paired with more than $600 million of dividends and fees it collected from SeaWorld prior to and as part of the IPO, according to securities filings, the firm more than made back its cash investment.

Earlier this month Blackstone raised another $520 million selling more of its shares to the public, and about $45 million in a share-buyback agreement with SeaWorld. Blackstone continues to own about 40% of SeaWorld, a stake that is worth about $1 billion based on the current share price.

The deal’s profits have spilled over to a broad swath of investors, including public pensions such as the Florida State Board of Administration, the Texas Teachers Retirement System, and California State Teachers’ Retirement System, which have stakes in the buyout fund Blackstone tapped to buy SeaWorld.

Blackstone hasn’t heard complaints from its investors over the matter, said people familiar with the firm. Florida State Board of Administration spokesman Dennis MacKee said the pension manager doesn’t comment on individual holdings and added: “We’re one step removed and don’t know all the details.” Representatives for the funds in Texas and California – two other states in which SeaWorld operates parks — declined to comment.

In an interview Friday, SeaWorld Chief Executive Jim Atchison said last week’s advertising campaign was intended to counteract “misconceptions” about its operations. Of “Blackfish,” he said, “We take great issue with the film; we consider it a compilation of animal activist propaganda.

“It is not a fair representation of the work we do or the care we take with our animals,” Mr. Atchison said in an interview.

Blackfish director Gabriela Cowperthwaite said, “the facts in the film are indisputable.”

“It’s an air-tight document and anybody can look up the information in the film at any time and find out on their own,” she said in an interview.

The film, which was released in theaters in July, has garnered an increasingly wider audience. It premiered on CNN on Oct. 24th to an audience of some 20 million, and has since become available to millions more viewers via outlets such as Apple Inc.’s iTunes and Netflix Inc.’s streaming video service.

Well-known musicians, including Willie Nelson and Heart, have cancelled planned performances at SeaWorld’s parks. Attendance at SeaWorld’s three parks is “markedly better” since “Blackfish” made its July debut, Mr. Atchison said. “It’s had no impact on our business,” he said, adding that SeaWorld, which also owns Busch Gardens theme parks, is on pace to notch record annual results.

For the three-months ended Sept. 30, SeaWorld said its attendance was down 3.6% from the same period a year ago, a softer year-over-year decline than the company reported during the second quarter. Meanwhile, SeaWorld’s revenue per attendee rose 6.9% to $60.74 during the most recent quarter. That, and cost cutting, lifted SeaWorld to its best quarter ever for revenue and profits by two different measures.

SeaWorld sold shares for $27 in the April initial public offering. The stock jumped 24% on its first day of trading, and within a month it hit a high of $39.65. Since then, however, the stock has slid back toward its IPO price, closing at $28.79 Monday afternoon.

Mr. Atchison attributes the stock’s swoon to volatility common at companies with newly listed and thinly traded shares.